CCC Debt Management, Insolvency Practitioners, Household Debt, Debt Matters, Corporate Recovery

A company has obtained goods on credit that were ordered by a director of the company. Shortly afterwards, the company goes into an Insolvency process and you do not get paid. It turns out that when the goods were originally ordered on credit, the company was not in a position to pay for the goods all along, therefore the company was trading whilst insolvent, which we all know is illegal. The creditor company will obviously feel that they have been mislead, but how do you get your money back?
A recent Court case shows that there may be a way for a creditor to be able to claim directly against the director who ordered the goods (Contex Drouzhba Limited v Wiseman).

What happened in this particular case was that the company director had signed an agreement with the claimant on behalf of the company promising it would pay for goods ordered in the future. The fact in this case was that the director knew all along that his company was insolvent and that there was no prospect of any injection of capital. Therefore, instead of suing the insolvent company, the claimant sued the director personally for being deceitful, and the Court found for the claimant.

In signing the agreement on behalf of the company, the director was implying that it was able to meet its obligations. This was untrue and the director was personally liable for deceit as he knew it was untrue. The director stated that he had signed the agreement on behalf of the company and not as a personal guarantee. The Court said that where a director was effectively the mind of the company, and where the agreement he signed made a fraudulent representation to his knowledge, it was clear that even if the company would be liable for the deceit carried out by its director, the director has a personal liability for his own fraud.

Not every agreement signed by a director would contain implied representations by the director, but the agreement in this case contained a promise of payment on which the claimant would obviously rely on before accepting further orders.

This was an important case involving a very common situation. It does not allow a claim in every case against a director. However, where the director is effectively in control of the company; he signs the order for goods; and when he does so he knows that the company is insolvent, there are now prospects that a claim can be made against the director personally.

So let this case be a warning to all those directors who think that they can simply walk away from their obligations!!

And for the creditor, not only is it worth bearing in mind for the future but also a reminder to reviewing recent debts following a company failure. There might just be a controlling director who could be liable.

Should you require any assistance or advice regarding these matters, please do not hesitate to contact us.

Peter Lister
Manager

Continental Cash Collections Limited Trading as "CCC Debt Management" recently hit a milestone having just completed 25 years of being trading since being formed in 1982.

Initially the company was set up to recover debts for overseas clients who were trading with companies within the UK, hence the name "Continental Cash Collections Limited" and 25 years on we are still acting for many of our original clients which is a great testimony to the company.

The credit crunch has become a serious issue and these days it seems to be the daily headline on any newspaper you read or television you watch.

At CCC we have recently seen a steady increase of new clients who have instructed us to recover debts from companies within the construction industry. Due to the current situation, banks are reluctant to advance funds and it is inevitable that the construction industry is going to see increasing problems in the forseeable future.

Due to the current economic climate and in order to provide our customers with specialist legal advice as and when required, we are pleased to announce that we have recently aquired the services of an in-house Lawyer

Fenton Finance Limited, the wholly owned subsidiary of Continental Cash Collections Limited, has recently entered into a deal with Brent Webb of Leeds Rhinos whereby they will be sponsoring his car for the duration of his contract in the UK.

Brent is one of Leeds’ most exciting signings for many years, starring in the recent Tri Nations Series (and currently the Rhinos’ leading try scorer this year).

Continental Cash Collections Limited has for many years supported Leeds Rhinos, together with Peter O’Hara of O’Hara & Co Individual and Corporate Recovery Specialists.

When Leeds Rhinos aquired the services of Brent Webb from Auckland Warriors for the 2007 season it was rumoured that he could possibly be the best overseas signing Leeds had ever made.
Having watched most of the other imports over the years, I would say in my opinion, after only one year into his 2 year contract, I have got to say I think he has already proved himself to be the best in my time of watching Leeds.